What’s Next for Ooyala?

Why This Matters

Ooyala likes its strategic
chances of focusing on
two growing divisions
and parting with ad-tech.

Despite a recent write-down by its owner, multiscreen video specialist Ooyala remains bullish about its future.

Though that future likely will not include its struggling ad-tech division, it will center heavily on its two other lines of business, which are doing well by comparison — its online video platform (OVP) and Flex, its automated workflow-management system.

Ooyala is already in talks with a number of interested parties about buying its ad-tech business, but intends to be on the other side of the ledger with respect to deals that can help it expand the opportunities for the OVP and Flex units, according to Jonathan Huberman, who came on board as Ooyala’s CEO last April.

That offers a rosier view than how things were perceived earlier this month, when Ooyala’s owner, Australia-based Telstra, announced it would recognize an impairment charge of about A$272 million (U.S. $215 million).

That non-cash impairment and write-down carried the value of Ooyala, which has been serving as Telstra’s U.S.-based video tech business, to “zero.” Telstra acquired 9% of Ooyala in 2012, and raised it to 98% in 2014 as it locked onto the growing online video trend.

The goodwill write-down represents the difference between ad tech’s book value and real value. It’s believed Telstra took an extremely conservative approach here that isn’t indicative of the value of Ooyala’s complete company.

Huberman acknowledged that the write-down announcement “caused a lot of noise,” but stressed that it was mainly due to the performance of Ooyala’s ad-tech business, which will eventually be sold.

Ooyala, which has about 500 employees, isn’t big enough to support three different units, he said.

While OVP and Flex align well, ad-tech, despite selling to some of the same companies, represents a different “sales motion and a completely different model,” Huberman said.

Going forward, he said, it makes more sense for Ooyala to focus on and invest in the other two businesses.

Flex “is growing like a weed, and we’re signing up major customers,” Huberman said.

Flex Builds Muscle

A timely example is Intel’s sports unit, which is using Flex to underpin the virtual reality (VR) coverage around the 2018 Winter Olympics. More specifically, Ooyala is providing the media asset-management capabilities and surrounding workflow that is being distributed to each country’s broadcast rights holders. Among them is NBC Olympics, which is providing more than 50 hours of live virtual reality coverage on several platforms via the NBC Sports VR app.

Huberman said Flex has also signed on several major, tier-one media companies — broadcasters and media creators that can’t be named yet — and bookings for the platform have been growing by more than 100% per year.

Ooyala has only been aggressive with its marketing of Flex in the past couple of years, and believes its targeting a market without a lot of competition.

“Flex focuses on everything from commissioning a script to the post-production concepts,” Belsasar Lepe, chief technology officer and a co-founder of Ooyala, said.

Rather than displacing another vendor, Flex is stepping in with an automated workflow for content creation, the company said. That workflow offers an alternative to legacy, manual systems that, for example, use spreadsheets to manage where a specific piece of content is within the overall workflow.

“There’s a significant amount of investment that’s going into just creating new content,” including emerging formats like VR and augmented reality, Lepe said. “We strongly believe that content is the kingmaker, but unfortunately not everyone has the ability to go and create content. They have to operate within their existing budgets.”

OVP, which been the center of Ooyala’s traditional business, has also shown signs of strength that haven’t been seen in a couple of years, according to Huberman.

Although Ooyala believes Flex has limited competition, that’s not the case for OVP. It will continue to face off with a large mix of different sized tech players that focus on all aspects of the multiscreen video ecosystem, including major, well-heeled outfits such as The Walt Disney Co.-backed BAMTech, Verizon Digital Media Solutions, Amazon, IBM and Comcast Technology Solutions, as well as NeuLion, Brightcove, Zype and Kaltura.